You might wonder why we are looking for a possible top in USDNOK, as the underlying trying for 2014 is with no doubt up.
Based on the underlying economy in Norway and the forecast for Norges bank, the index weighted Krone should be a lot stronger than current levels. But stronger macro from US and falling oil price has reduced the demand for NOK, especially against US dollar (USD). However, we feel that current risk/reward is tilted on the downside based on following factors.
Upcoming week, we following events from Norway.
- Budget statement (Wed), should be more oil spending as this sectors drags down the overall activity in Norway. A higher spending means more buying of Norwegian Krone for Norges Bank.
- Core inflation (Fri), should surprise on the upside and above Norges Banks forecast of 2.5% as weaker NOK should support a higher inflation (imported) a long with higher food prices and airfares.
From a technical point of view:
Weekly chart:
- 61.8% retracement from 2009 highs around 6.50+
- Overshoot from current trendchannel on the upside. In most cases we see a powerful reverse after such events
- RSI (weekly) is above 70. Last two times this happend, we did set a meaningfull top
Resistance: 6.60 and 6.80
Support: 6.25/6.20 and 5.95/6.00
Again, we have last two weeks been wrong regarding a possible top in USDNOK and we are trying to catch a falling knife. However, we feel risk/reward is on our side based on fundamental factors. But the market is for now telling us that the trend is clearly up.
Safe trading!
Based on the underlying economy in Norway and the forecast for Norges bank, the index weighted Krone should be a lot stronger than current levels. But stronger macro from US and falling oil price has reduced the demand for NOK, especially against US dollar (USD). However, we feel that current risk/reward is tilted on the downside based on following factors.
Upcoming week, we following events from Norway.
- Budget statement (Wed), should be more oil spending as this sectors drags down the overall activity in Norway. A higher spending means more buying of Norwegian Krone for Norges Bank.
- Core inflation (Fri), should surprise on the upside and above Norges Banks forecast of 2.5% as weaker NOK should support a higher inflation (imported) a long with higher food prices and airfares.
From a technical point of view:
Weekly chart:
- 61.8% retracement from 2009 highs around 6.50+
- Overshoot from current trendchannel on the upside. In most cases we see a powerful reverse after such events
- RSI (weekly) is above 70. Last two times this happend, we did set a meaningfull top
Resistance: 6.60 and 6.80
Support: 6.25/6.20 and 5.95/6.00
Again, we have last two weeks been wrong regarding a possible top in USDNOK and we are trying to catch a falling knife. However, we feel risk/reward is on our side based on fundamental factors. But the market is for now telling us that the trend is clearly up.
Safe trading!